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Insurance

Insurance can help you to meet costs after unexpected events such as a medical emergency or a natural disaster. Insurance works by you agreeing to pay small amounts to an insurer over a certain period of time.

In some ways, insurance is like carrying an umbrella when it’s sunny; you might not need it, but if it rains you’ll be glad you have it.

When you buy insurance, you secure yourself, your assets or the things you own against a possible unwanted outcome. It’s a risk management strategy; a way of ensuring that if something bad happens, you have some security and protection against the expenses that might occur.

One definition of insurance uses the example of people riding bikes. Bike riders are exposed to the risk of head injuries. It’s not certain that a rider will definitely be in an accident that causes a head injury but bike riders are encouraged to wear helmets, anyway. The helmet acts as insurance by protecting bike riders from possible head injuries. The price paid by each bike rider for this insurance is the cost of the helmet; this is similar to buying medical or disaster insurance.
Any risk that can be quantified or given a dollar value can be insured. Although some losses, such as death or injury, are hard to measure in financial terms, insurance pays an amount for the damage, loss, injury or death.